February 3, 2013

Outpatient markups fuel outrage

A battle is brewing nationwide over billing by outpatient surgery centers.

By CHAD TERHUNE Los Angeles Times

A surgery center charged teacher Lynne Nielsen $87,500 for a routine 20-minute knee operation that normally costs about $3,000.

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health insurance
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Long Beach, Calif., teacher Lynne Nielsen protested after her insurance company was billed $87,000 for her routine knee surgery.

McClatchy Newspapers

Despite the huge markup, her employer and its insurer, Blue Shield of California, paid virtually all of the bill from Advanced Surgical Partners in Costa Mesa, Calif. Blue Shield mailed the $84,800 check to the high school Spanish teacher in December and told her to sign it over to the surgery center.

Nielsen said she was outraged and refused to send the check. Instead, she asked the California attorney general's office to investigate the matter. "This is insane," she said.

The 61-year-old is one of the latest patients caught up in a growing battle nationwide over billing by outpatient surgery centers. Industry experts say some of these centers seek out well-insured patients such as Nielsen, sometimes by waiving their co-payments and deductibles, and then bill their insurers exorbitant amounts for out-of-network care.

All too often, critics say, insurers pay these large sums and then cite high medical bills for why insurance premiums keep rising for businesses and consumers.

"This bill is so outrageous it almost takes my breath away," said Gerald Kominski, director of the Center for Health Policy Research at the University of California-Los Angeles. "This is an example of what's wrong with our health-care system, and employees and taxpayers of the school district are paying the price here."

In response to questions from the Los Angeles Times, Blue Shield defended its $84,800 payment as proper. Advanced Surgical Partners, through its lawyer, said the bill was excessive. Amid the scrutiny, the two sides agreed to a lower amount.

Nationwide, some insurers have begun to challenge these bills from outpatient centers. Last year, a unit of insurance giant Aetna Inc. sued several surgery centers in Northern California and accused them of overbilling the insurer more than $20 million. It has pursued similar actions against providers in New Jersey and Texas. Other insurers such as UnitedHealth Group Inc. have filed similar suits in California.

In one instance, Aetna said, a California surgery center charged $73,536 for a kidney stone procedure when the average in-network charge was $7,612. Aetna said it paid some of these bills before disputing them in court.

Doctors and surgery centers say the criticism is unjustified. Surgery centers say they have helped reduce health-care costs by offering convenient care at a fraction of what hospitals charge for colonoscopies, cataract surgeries and other procedures. These facilities now handle up to 40 percent of all outpatient surgeries, according to the Ambulatory Surgery Center Association.

Nielsen went to Advanced Surgical Partners in November at the recommendation of her surgeon even though it was out of her insurance network. She checked beforehand with the facility and it assured her they would accept whatever Blue Shield offered to pay.

The surgery center's $87,500 bill was just for use of its facility and supplies. Nielsen's orthopedic surgeon and anesthesiologist billed separately and were paid about $1,200 combined.

Henry Fenton, an attorney for the surgery center, said this bill "was excessive and not correct. I'm sure they will be more careful in the future."

Blue Shield said its typical rate for this arthroscopic knee procedure in Southern California is about $3,000 among in-network providers.

"This surgery center is charging 30 times the average by remaining out of network to advance this outrageous and anti-consumer practice," said Blue Shield spokesman Steve Shivinsky. "This is a national problem."

Yet the company said it was obligated to pay nearly all of Advanced Surgical's bill because it is bound by the health plan rules set by the teacher's employer, the Long Beach (Calif.) Unified School District.

(Continued on page 2)

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